Could this be the next international challenge for Treasury Wines (ASX:TWE)?

A challenger could be approaching in the esteemed winemaker’s fastest growing market.

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The Treasury Wine Estates Ltd (ASX: TWE) share price has been caught in the whirlwind of China’s tariffs in recent times. However, there could be more obstacles on the ASX-listed winemaker’s roadmap in the future, this time in the United States.

At the time of writing, the Treasury Wine share price is perched at $12.41, up 0.5%. This figure is up an impressive 36.9% over the past year.

Let’s dig deeper into the winemaker’s latest potential adversary.

Paths crossing at the vineyard

In March of this year, Treasury Wines released the final determination on Australian wine imports into China.

The decision was made by China’s Ministry of Commerce (MOFCOM) to impose a 175.6% duty rate on the company’s Australian wines being imported into the Asian country. Unfortunately for shareholders, the punitive tariff is set to be in place for at least five years.

As a result, the Australian wine producer has been forced to pivot and refocus on expansion in other markets. One of which has been the United States, led by a push of the ’19 Crimes’ brand in partnership with the iconic Snoop Dogg.

Evidently, the effort has been rewarded in FY21. In its full-year result to the ASX, Treasury Wines noted that its earnings before interest and taxes increased 54.1% year-over-year in the region.

However, often where there is a success, others see a market opportunity ripe for the picking. That so happens to be the case with former Treasury Wines CEO, David Dearie.

Eight years on from getting the chop as CEO of Treasury, Mr Dearie is now leading the helm at US-based winemaker Ste. Michelle Wine Estates. Additionally, the potential Treasury rival could soon be in the hands of New York private equity firm, Sycamore Partners. An outcome that would have investors looking more closely at the Treasury Wines share price.

Although, the buyout from Altria Group Inc (NYSE: MO) is awaiting a final decision from US competition regulators.

Ste. Michelle with a tasty number of its own

Both ASX-listed Treasury Wines and US-based Ste. Michelle compete on many of the same playing fields in the United States. In fact, there is a striking similarity in brands.

While Treasury is promoting 19 Crimes, Ste. Michelle is fronting its charge with 14 hands. Both are a combination of a number and a word that lend themselves to an interesting story — a marketer’s delight.

Importantly, the reinvigorated US winemaker is showing signs of a turnover in the last year. In the half-year period to 30 June, the company recorded US$317 million in revenue — representing an increase of 14% on the prior corresponding period.

Meanwhile, EBIT swung from a US$366 million loss to a US$45 million profit. A success that has perhaps put Treasury Wine shareholders a little closer to the edge of their seats.

Analysts weigh in on ASX-listed Treasury Wines

Analysts have also been accounting for all the factors in the Treasury Wines’ share price recently. According to the team at Goldman Sachs, the Australian company could be fully valued at current prices.

In a note, the broker retained its neutral rating with a slightly improved price target of $11.60. However, this would reflect a potential downside of 6.8% compared to the current share price.

The broker reasoned that the continued commercial market uncertainty for demand weighed on the Treasury Wines’ share price target.

Should you invest $1,000 in Treasury Wine Estates right now?

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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